Glossary: M02 — Security Market Indexes
| Term | Definition |
|---|---|
| Benchmark | A standard index used to evaluate the performance of a portfolio or investment |
| Constituent | An individual security included in an index |
| Equal-Weighted Index | An index where each constituent has the same weight regardless of size |
| Float-Adjusted Market Cap | Market cap calculated using only shares available for public trading (excludes locked-up shares) |
| Free Float | The portion of a company’s shares that are freely available for public trading |
| Fundamental-Weighted Index | An index weighted by fundamental factors such as earnings, dividends, or book value |
| Hedge Fund Index | An index tracking hedge fund returns; subject to survivorship and selection bias |
| Index Reconstitution | The periodic process of adding or removing constituents from an index |
| Index Rebalancing | The periodic adjustment of constituent weights back to target levels |
| Market-Capitalization-Weighted Index | An index where constituents are weighted by their market capitalization |
| Price Return | The percentage change in the index value, excluding income from dividends or interest |
| Price Return Index | An index that reflects only the price changes of its constituents |
| Price-Weighted Index | An index where constituents are weighted by their share price (e.g., DJIA) |
| Rebalancing | Adjusting the weights of index constituents back to their target allocations |
| Security Market Index | A measure of the value of a group of securities, used to track performance of a market or segment |
| Total Return | Price return plus income return (dividends, interest) |
| Total Return Index | An index that reflects both price changes and reinvested income |
| Unweighted Index | Another term for an equal-weighted index |
Related: M02 Module Page | Equity Formulas